The equity markets have technically been oversold. The recent rally has been based on the top 4 insolvent large banks claiming profitability for the first 2 months of the year. This coupled with Geithner's plan for large scale transfer of taxpayer wealth to said 4 insolvent institutions has resulted in a dead cat bounce.

From the comments section over at Naked Capitalism:

"Bonds are pricing in unheard-of and devastating levels of default. Deutsche Bank recently calculated dollar investment-grade corporate bonds were pricing in a five-year default rate of 40% assuming average recovery rates. Even if one makes the unlikely assumption that bondholders recover nothing after default, prices suggest a 25% default rate over five years. The worst five-year investment-grade default rate since 1970 is just 2.4%. The average is 0.9%."

The bond markets will be financing all of Obama's economic plans and Obama is protecting bondholders at all costs. Its logical to watch the bond markets for signs of recovery. They are pricing in more pain. Deleveraging is inevitable and painful. Fighting leverage with more leverage, debt with more debt will on delay and intensify the pain.

http://www.nakedcapitalism.com/2009/03/has-gaming-of-public-private.html

http://online.wsj.com/article/SB123803103548043611.html

Mr. Leonard, for the love of Dog, would you please (PLEASE!)stop with the references to the short term moves in a stock index ("So, there's ample room for pessimism. And indeed, in the time it took to write this post, the Dow slumped from a 100 points up to 15 points up.") as though they mean anything at all? I can think of nothing less relevant to the discussion of signs of economic life (or lack thereof) than the utterly irrational herd behavior reflected in the minute to minute, hour to hour or day to day fluctuations of a stock index and this is especially true for a very narrow index like the DJIA.

As far as economic reporting on things like home sales and durable goods, I'm going to suggest that you play Toto and pull back the curtain to see what is behind it. What if I told you that despite the press reports, there was a very good chance that there was NO uptick in housing beyond statistical noise, or worse than that, the very large margin of error in the numbers (widely ignored) means that there may in fact have been a fall in home sales? It's fuzzy numbers, Mr. Leonard. Check it out for yourself. See http://www.chrismartenson.com/blog/fuzzy-reporting-press-helps-distort-housing-data/15540. (Linked in my signature for click-thru.)

More Fuzzy Reporting: http://www.chrismartenson.com/blog/more-fuzzy-reporting-new-home-sales-misrepresented/15617

And while we're at it, remember the "positive news" on durable goods? Look closer. http://www.chrismartenson.com/blog/more-fuzzy-numbers-durables/15630

And on the whole subject of fuzzy numbers in general: http://www.chrismartenson.com/crashcourse/chapter-16-fuzzy-numbers

There is nothing at any of those links that is not in plain English or which requires any sort of specialized knowledge or advanced degree to understand. I encourage you to examine the analysis there. It's short, won't take much time and may be helpful in evaluating some of the "good news" that is being...uh...reported. Then again, you and others may find it all to be bunk. But I wouldn't bet on that. Not even with a credit default swap.

California does NOT have home values that are in freefall anymore. We hit the crash before most of the rest of the nation, and we seem to be seeing some recovery. Not rising prices, but investors and first-time buyers are now snapping up homes in foreclosure (they were waiting on the sidelines until just a few months ago) and prices are not declining month to month. Realtors are reporting that they get multiple offers on some homes. I'm seeing construction happening again, although it's all for business and it's nothing like the mass projects that were happening just 2 years ago (thank the powers - those were ridiculous). Our unemployment is staggering (10.5%, I believe), but it is staying stable. I don't know how far recovery is, but I think we've either bottomed or come very close to it.

The housing bust didn't hit everywhere at once, and it won't end everywhere at once. The media are treating "the economy" as if it were even throughout the nation, but it isn't. Some regions are still seeing growth, while others are stable, and yet others are in major decline right now.